New private activity bond legislation introduced in Senate

In August, Senators Bob Menendez (D-N.J.) and Mike Crapo (R-Idaho) re-introduced bipartisan legislation, S.3358, the Sustainable Water Infrastructure Investment Act of 2018, which would modify the tax code to remove state volume caps on the issuances of government private activity bonds (PABs) used by water and wastewater systems for infrastructure investment.

PABs are a form of tax-exempt financing for state and local governments, in conjunction with a private entity, to aid in the funding of a particular infrastructure project. Currently, federal law limits the use of PABs through state volume caps for water and wastewater projects.

The legislation builds upon the use of current federal investment in water and wastewater infrastructure by providing public utilities with another financing tool to encourage increased investment to meet our nation’s growing water and wastewater needs.

The National Association of Water Companies (NAWC) applauded the reintroduction of the Sustainable Water Infrastructure Investment Act and Sens. Menendez and Crapo, noting that the legislation would stimulate private investment in drinking water and wastewater systems by modifying the tax code to remove state volume caps on the issuances of government private activity bonds — the same tax treatment other types of public infrastructure already receive, including airports, high-speed rail, and the solid waste disposal industry.

“There’s widespread consensus that our nation’s water infrastructure needs an investment boost, and there’s no doubt that investment is also good for our economy, said NAWC President and CEO Robert Powelson. “If enacted into law, this legislation could bring billions in new water infrastructure investment and help create and support more than 1.4 million jobs.

“Eliminating the volume cap on water infrastructure will lead to new drinking water and wastewater infrastructure investment, while allowing the issuance of exempt facility bonds provides municipalities with a lower cost financing option. All of this adds up to a major win for our water systems, communities and each and every American.”

Private activity bonds are a form of tax-exempt financing for state and municipal governments that want to partner with a private entity to meet a public need. Exempt facility bonds utilize private capital instead of public debt and shift the risk and long-term debt from the municipality to the private partner. The tax-exempt bonds provide lower cost financing, which, in turn, provides lower costs for customers. In addition, eliminating the volume cap on water infrastructure along with other regulatory changes could lead to:

  • an additional $43 billion in incremental private water infrastructure investment;
  • $15-25 billion in incremental private wastewater infrastructure investment; and
  • generate a potential $20 billion from public-private partnerships.

Similar bipartisan legislation, H.R. 3009, the “Sustainable Water Infrastructure Investment Act” was introduced in the House by Congressmen John Duncan (R-Tenn.) and Bill Pascrell (D-N.J). NAWC says it urges swift passage of the Sustainable Water Infrastructure Investment Act in order to facilitate and expedite investment in America’s water infrastructure.

For more information on removing state volume caps on the issuances of government private activity bonds for water/sewer infrastructure projects, please contact Jason Isakovic, NACWA’s legislative director.


Sources: NAWC, NACWA

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